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The revised Athens Convention: strict liability and higher limits of liability for passenger claims

08.04.2014

The 1974 Athens Convention and its successor, the 2002 Protocol, regulate the liability of carriers and their insurers for passenger and luggage claims. In the wake of major casualties such as the Costa Concordia, there has been an increasing need for an updated and coherent legal framework in the cruise ship industry.

Introduction

The 2002 Protocol will take effect 12 months after 10 member states have ratified it. On 23 April 2013, Belgium became the 10th member state to ratify the Protocol and it will now come into force on 23 April this year. The 2002 Protocol to the Athens Convention revises and updates the 1974 Convention. It will also significantly alter the landscape of passenger claims by imposing a form of strict liability for any “shipping incident” and substantially increasing the liability limits for passenger injuries.

The basic features of the Athens Convention 1974

The Athens Convention established a fault-based liability regime for damage and injuries suffered by passengers at sea. In “non-ship related” cases, the passenger has the burden of proving the fault or neglect of the carrier and the extent of the loss or damage suffered. On the other hand, in “ship-related” incidents, such as shipwreck, collision, stranding, explosion, fire or defects in the ship, the burden of proof shifts from the passenger to the carrier. In such cases, the carrier is presumed to be at fault and, to avoid liability, must prove that he took all necessary precautions to avoid the accident. 

The carrier can limit his liability except where he acted with intent to cause damage or recklessly and with knowledge that such damage would result. However, the limits under the 1974 Athens Convention are significantly low. For death and personal injury to a passenger, the limit of liability is 46,666 SDR (about US$ 72,000).

The Key Changes under the 2002 Protocol

(i)    Compulsory Insurance (Art. 4bis)
Compulsory insurance is not a new concept. It was first introduced by the 1969 Civil Liability Convention. The rationale behind compulsory insurance is to protect the injured passengers and ensure that funds are available to compensate the victims. The 2002 Protocol requires vessels licensed to carry more than 12 passengers and registered in a state party to maintain insurance or other financial security (such as a bank guarantee) up to the strict liability limit. But compulsory insurance applies only in respect of claims for death or personal injury to passengers. It does not apply to claims for loss of or damage to luggage. On a practical level, to comply with the Protocol requirements, carriers will need: (a) blue cards issued by their P&I insurers and (b) a Certificate issued by a State Party confirming that insurance or other financial security is in place.

(ii)    Right of Direct Action against Insurers (Art. 4bis (10))
The 2002 Protocol allows claims for compensation to be brought directly against the liability insurer for claims up to the strict liability limit. Facing such a claim, the insurer is allowed only a limited set of defences. He cannot avail himself of any of the defences to which he might have been entitled in proceedings brought by the carrier such as unseaworthiness or “pay to be paid”. Such defences are not available to insurers against passengers.

(iii)    Limits of Liability (Art.3(1) and Art. 7(1))
The 2002 Protocol raises liability limits significantly. For death and personal injury claims, the limits have been raised to SDR 250,000 (about US$ 387,000) per passenger on each distinct occasion. If the loss exceeds the limit, the carrier is further liable up to an overall maximum limit of SDR 400,000 (about US$ 620,000) per passenger unless the carrier shows that the incident which caused the loss occurred without his (or his servants’) fault or neglect.

Liability limits have also been increased for loss or damage to luggage and vehicles as follows:

-    Loss or damage to cabin luggage – 2,250 SDR
-    Loss or damage to vehicles (including luggage carried in it) – 12,700 SDR
-    Loss or damage to other luggage – 3,375 SDR

(iv)    Strict Liability (Art.3)
In relation to “ship-related” incidents, the fault-based regime under the Athens Convention 1974 is now replaced with strict liability.

But there are two tiers to the liability. In the first tier, the carrier is strictly liable up to the set limit (SDR 250,000) unless the carrier can prove that the accident was caused by (a) a natural phenomenon, act of war, hostilities or insurrection; or (b) by a third party with intent to cause the incident (such as a terrorist act). The second tier is above the strict liability limit (up to SDR 400,000) and, in this case, the carrier is liable unless he can prove that the incident causing the loss occurred without his fault or neglect.

As regards “non–ship related” incidents, the fault-based regime of the Athens Convention 1974 has been retained.

(v)    Opt-out Clause (Art.7(2))
The 2002 Protocol allows member States to adopt higher limits of liability or even unlimited liability for death and personal injury claims under their national law.

The European aspect: EU Passenger Liability Regulation 392/2009

As a matter of EU law, the 2002 Protocol has been implemented by the EU Regulation 392/2009 (“PLR”) and is directly applicable to 27 Member States since 31 December 2012.  The PLR ensures a single set of rules governing the rights of carriers and passengers in the event of an accident across the EU.

The PLR creates a coherent legal framework within the EU as it ensures that all EU citizens have access to the same levels of compensation when travelling between EU Member States. It extends the scope of the 2002 Protocol to cover certain domestic services in addition to international trading vessels. It obliges the carrier to make an advance payment (of € 21,000) to cover immediate economic needs in the event of death or personal injury claims.

Impact of the 2002 Protocol on P&I Insurers 

Despite the increased exposure which has arisen as a result of the 2002 Protocol, the International Group of P&I insurers has agreed to issue blue cards for non-war risk liabilities in respect of both international and domestic trading voyages covered by the PLR. 

Comment

The changes introduced by the 2002 Protocol and by the PLR are very significant for the passenger vessel industry. 

Although the PLR is already in force within the EU, EU Member States still need to ratify the 2002 Protocol individually to ensure uniformity. This is particularly important when it comes to disasters like the Costa Concordia. The incident happened in Italy on 13 January 2012. The PLR came into force a year after the incident.  Italy is not a signatory to the Athens Convention 1974 or the 2002 Protocol. If the incident had happened a year later, the position would have been very different for the victims/passengers of the vessel in terms of the increased limits under the 2002 Protocol and the PLR. This illustrates the need for a coherent and uniform legal framework. It is to be hoped that this is what the new rules will provide.